Treasury planning an Advantage West Midlands closing down sale

The true cost of abolishing the West Midland’s regional development agency has emerged after Business Secretary Vince Cable admitted some of the region's prime business parks could be sold to pay for its closure.

The true cost of abolishing the West Midland’s regional development agency has emerged after Business Secretary Vince Cable admitted some of the region's prime business parks could be sold to pay for its closure.

Sites set to be sold include Longbridge, Ansty Park in Coventry and the i54 park in Wolverhampton, which are owned by Advantage West Midlands, the government agency which is to be axed.

Dr Cable said regional development agencies could be forced to sell their assets and donate the money to the Treasury to offset the estimated £1.4 billion cost of closing them down.

And, speaking to MPs, he revealed that new organisations set up by local councils and chambers of commerce to replace the regional agencies, called Local Enterprise Partnerships, will get no guaranteed funding.

Business leaders have urged ministers to transfer the RDA’s sites to the new local enterprise partnerships.

Earlier this year, Jerry Blackett, chief executive of Birmingham Chamber Group, said: “I think the prize for us is to convince the Government quickly that we need to keep AWM assets to continue our regeneration work.”

But Dr Cable warned that the regional development agency (RDA) could be forced to sell its assets instead.

Asked by MPs to explain how the Government would fund the cost of closing RDAs, Dr Cable said: “They have assets that will have to be sold in an orderly way to get value for money.”

Some assets could be kept in public ownership, he said. But he suggested agencies might be forced to sell everything they own, telling MPs: “It may well be true in some of the RDAs that the liabilities exceed the assets.”

The Department for Business, Innovation and Skills was waiting for RDAs to provide it with a complete breakdown of their assets and liabilities, he said.

AWM has spent £185 million building up its portfolio of 44 sites, which have an estimated value of just £100 million because of falling property prices.

The cost of closing England’s eight regional development agencies has been estimated at £1.4 billion, including redundancy pay, the cost of closing buildings and compensation for cancelled contracts, as well as the cost of honouring some contracts.

Dr Cable also made it clear to MPs that while RDAs such as AWM each had budgets of up £300 million, the local enterprise partnerships that replace them will get no guaranteed income.

They will be able to bid for cash from the £1.4 billion regional growth fund created by the Government to boost regional economies, and a panel chaired by former Deputy Prime Minister Lord Heseltine will approve or reject proposals.

LEPs could also administer schemes such as Tax Increment Financing, which allow councils to borrow cash for capital investment against future increases in business rates.

West Midlands councils hope to raise more than £500 million to fund key transport schemes including a rapid transit system between Birmingham city centre and the airport.

But there will be no guaranteed annual budget from Whitehall, Dr Cable said.

“If local authorities feel this is a useful vehicle they may well wish to contribute.” He added: “We are not talking about allocating government money.”

The aim was not to replicate RDAs, which had their own staff and offices, he said.

Asked how LEPs would function without funding, he said councils and Chambers of Commerce were capable of getting things done without Government money.

“I think you are underestimating the creativity of the local groups coming up from the grass roots,” said Dr Cable.

But speaking after the hearing, Birmingham MP Jack Dromey (Lab Erdington), a member of the Commons Business Committee, said councils could not pay for local enterprise partnerships after the Government’s recently anounced cuts in funding for local authoeities.

He said: “AWM was well-resourced. Now we know that the LEPs will not get one penny of this money.

“But councils are already facing 27 per cent cuts in their funding, and will not be able to establish effective LEPs.”